When Ken Gold purchased a newly built home in Fishtown in 2016, he expected to pay about $600 a year in property taxes, thanks to Philadelphia’s 10-year tax abatement for new construction.
But his tax bill is now more than three times higher than that estimate, which the city had given to Gold’s builder. The city taxes only the land on such abated properties, not the buildings. In 2017, however, Philadelphia reassessed land values.
The value of the land underneath Gold’s four-story rowhouse is now more than other lots nearby — some larger than his.
“We’re willing to pay what’s fair, but we don’t want to be treated differently than anybody else, and we feel that people with new construction are being treated a lot differently,” Gold said.
For many homeowners, land values are largely immaterial, because they are simply portions of properties’ total market value used to calculate real estate tax bills. But they are very relevant for Gold and the thousands of other property owners who have tax abatements for new or rehabilitated buildings.
Land assessments are influenced by the buildings on a property, officials say. Most of the other lots on Gold’s Master Street block — regardless of whether they have an abatement — are assessed at a level between 26 percent and 30 percent of their property’s total market value. But that means Gold’s property, as well as others with abatements, have higher land values, because their homes are more expensive than older ones.
A recent report from City Controller Rebecca Rhynhart as well as an audit of assessments commissioned by City Council raised questions about Philadelphia’s methods for assessing land and suggested that they do not meet industry standards. Both reports were released this year as the Office of Property Assessment (OPA) faces scrutiny for recent assessment increases that led to tax hikes for many property owners.
While Mayor Jim Kenney’s administration has defended OPA and disputed findings in the audit and controller’s report, the office has committed to making improvements. Last week, Kenney launched a national search for a new head assessor, giving in to Council President Darrell L. Clarke’s calls to replace Michael Piper, who has held the job since 2014.
Land valuation is just one aspect of valuing property, but the criticism speaks generally to transparency issues: The city does not publicly post explanations of how it arrives at values, making it difficult for owners to understand whether their property is assessed fairly — and how best to appeal if they believe it is not. (City officials testified at a Council hearing in January that they will soon post more detailed assessment explanations online, as is required by city code.)
OPA says it values land using a method approved by the International Association of Assessment Officials, and takes into account a lot’s location and size as well as the condition of the building on the land. The most common land values are 15 percent or 30 percent of overall market value, said Mike Dunn, a city spokesperson.
Philadelphia began using that method in 2017, when, assessment officials said, it corrected previously inaccurate land values. The changes brought in an additional $31 million in tax revenue, the city said at the time. A Pew Charitable Trusts analysis found that 23,000 properties received higher tax bills as a result.
The controller’s report said the 2017 reassessment led to “large price discrepancies in land value on a per-square-foot basis” — at times among similar lots on the same block — and made the city’s land values worse overall.